Q2 2023 Nuvve Holding Corp Earnings Call

August 10, 2023

[music].

Good afternoon, and welcome to new the holding corporations second quarter 2023 earnings conference call.

All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.

To withdraw your question. Please press Star then two.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce Eduardo ROI as managing director of ICR. Please go ahead.

Thank you.

On today's call are Gregory prolong Chief Executive Officer, and David Robson, Chief Financial Officer of Newbie earlier today <unk> issued a press release announcing its second quarter 2023 results.

Following prepared remarks, we will open the call up for questions before we begin I would like to remind you that this call may contain forward looking statements. While these forward looking statements reflect <unk> best current judgment they are subject to risks and uncertainties that could cause actual results to differ materially from those implied by these forward looking projections. These risk factors are discussed in movies.

Fillings with the SEC and in the earnings release issued today, which are available on our website ngugi undertakes no obligation to revise or update any forward looking statements to reflect future events or circumstances.

With that I'd like to turn the call over to Gregory Pull-on, Chief Executive Officer of Navy Gregory.

Thank you Eduardo and Hello to all we thank you for joining our second quarter 2023 original goal. We are proud to have yet again achieved a record order quarter in Q2 2023 tapping the record set in Q1, and maybe bring yet another quarter of strong year over year growth across key metrics, including revenue megawatts under management.

And backlog.

We came into 2023 discussing Arab Tvs that'd be refinery heating and overdue inflection point in both interest in and adoption of vehicle to grid technology, and specifically our differentiated new the offering.

Our results in the first half of the year evidenced this and we are pleased to have increased visibility in our business.

Our conviction and optimize them. However, our funded on much more than just the improvement in order activity in the first half of the year.

<unk> remains the only pure play public company today with a proven track record in deploying commercially available and scalable BTG technology worldwide and players across the EV charging and grid infrastructure landscape are taking notice as.

As we sit here today, the interest from companies looking to explore ways in which to partner with us or leveraging our technology is not going to be higher than it was just six or nine months ago.

Industry participants are increasingly recognizing one the value of our technology and IP across areas, such as power flow control and EV charging management and the work, we're doing with AI and to the components of our experience and relationship and that it works in being able to provide a holistic fleet electrification solution.

The same cannot be said, we believe about always bearing BTG providers.

We look forward to building on this momentum as we go through the second half of 2023 and beyond.

Now to summarize our key accomplishments in the quarter and since last call.

We did last time, we won't go into specifics on orders other than to point out that our DC fast Chargers orders in Q2, so a more than 15% sequential improvement over the prior quarters then Richard.

More than 75% increase over the second quarter of 2022.

The big driver of this increase were the 25 do you need to order our largest single order to date that we discussed on our May call at the time. We noted that this was for a school district that was awarded phones via the EPA Clean School bus program, but it was not one of our districts. We supported in the Grand procurement process we.

We have since the stores, but this order was for a member of the Beacon mobility family of companies in Massachusetts Beacon is a large fleet provider comprised of several independent companies to the U S and operating over 11000 vehicles.

We also received orders associated with rebates for the 2022 EPS awards across multiple school districts in line with our previously communicated expectations.

While we have shipped some of the DC charges associated with the EPA funding a significant majority remains in the backlog and not likely to be shipped and recognized as revenue over the second half of the year.

Looking ahead, we look forward to supporting additional school districts as part of the 2023 installment of this massive program, which has an application deadline that is less than two weeks away.

Further we continue to see an ever expanding pipeline of potential orders beyond this.

During the quarter and so far in Q3, we continued to make progress on our strategic initiatives as well.

In Q2, we launched new VK 12, new dedicated division to provide a full range of services in order to support fleet electrification for North America had been transportation.

And importantly, we announced the hiring of David Burdick, and expands student transportation and automotive sales and marketing executives from Bluebird Corporation to build out of the program.

At Bluebird basically covers saw significant growth in the EV bus sales they've loved the supporting ecosystem and enhanced relationships with their network of dealers.

As touched on during our May call and alluded to in my earlier remarks. She electrification is a process. It is not a simple yes or no decision.

As future customers come up the learning curve. They may well decide that electrification is in their best interest, but it can take time for them to convince Whittles pack holders all the amazing Kermit without a better understanding of plan for how to optimize the transition to EV.

People with relationships and their ability to walk through the electrification process on a step by step basis.

And this is exactly what we have gained by bringing on David.

As I just alluded to orders can be lumpy, but the lumps appear to be getting bigger and more frequent and significant well we'd be critical to ensure we maximize their propulsion needs. A school district will look to scale up that adjudication journey.

In the second quarter. We also brought two advanced commercialization of our AI capabilities. We have long held the view that leveraging and developing AI technology has the potential to be a tremendous differentiator and a sales enabler for us which is why in early 2022, we entered into a JV called <unk>.

To explore AI integration into a heavy duty platform.

The fruit of this work is now paying off and we have announced both our strong capabilities in forecasting energy market values EBIT schedule and energy requirements.

The more testing power honest by AI.

Our view indispensible and invaluable in terms of the services. It provides to the end customers.

The more we maximize forecasting capabilities the better we're able to optimize our address challenges with your vehicle readiness energy management and battery health.

With the combined power of AI and <unk> you can.

Eliminate the various pain points of owning an electric vehicle and ultimately make BTG a strong selling point in the consumer market.

Today, we are seeing a reaction.

Put into practice studying with the enhanced frequency regulation guarantees our AI integration is enabling boss in the Nordics with Australia I platform is able to continuously protest price and capacity from Nordic primary reserve to optimize energy market and therefore optimize revenue for us and our customers.

Technology leverage newbie, six plus years of experience, providing frequency regulation services in the energy market and he is just one example of the benefits that AI integration can deliver to our customers.

In July we continue to evolve our AI capabilities by integrating <unk> into our new speed bumps charter management.

Our customers on the feedstocks that can now use the enhanced functionality to better manage their battery setup child's chartering status charging equipment and reports.

In other words, our customers can optimize all of these activities and therefore truly maximize revenue generation. Thanks to the power of our Australia technology.

Lastly on the strategy initiative front as we have discussed on the last few calls integrating movies gift platform into established third party hardware network is a critical part of our strategy and our partnership with Circle K announced in the first quarter is a great example of a Hollywood movie is executing on its strategy.

We continue to work closely with circle K on integrating and we are in the process of rolling out the technology across the different onsite predicted.

Our platform is also providing advanced services.

Before turning the call to David a quick update on the California Senate Bill or SB, 233, which I have discussed on the last few calls.

<unk> 33 intends to make bidirectional charging your requirement for consumer electric vehicles and electric school buses sold in California by 2030. We think this is a recognition of the societal benefit energy cost equity that BTG can unlock as more and more vehicles that extra five.

At the end of May we were pleased to see that the state Senate approved the bill where they go with a 2009 to nine.

This is expected by the end of this month the Bill will go through appropriation in the state Assembly and if successful would go for the ask somebody about thereafter.

We continue to have good dialogue with the day to day. There is on this topic and I'm optimistic on a favorable outcome for us with 33.

That obviously, David to discuss our financial results.

Thanks, Craig.

I'll start with a recap of second quarter 2023 results in the second quarter, we generated total revenues of $2 $1 million compared to one three in the second quarter of 2022 further as Gregory alluded to unit orders of our DC fast Chargers remained at elevated levels in Q2 2000.

Twenty-three growing over 15% from Q1 and over 75% higher than Q2 of 2022 supporting an increase in backlog in excess of $6 million, which in turn will support solid revenue generation in the back half of 2023.

Margins on product and service revenues were four 8% for the second quarter 2023, which was lower than the first quarter of 2023 17, 9% due to the impact of the timing of expenses associated with that customer sale through a long term lease arrangement and.

<unk> cost for two other long term projects under the lease accounting rules the sale hardware and installation costs were recognized as an expense upfront well a large portion of the associated revenues will be recognized over future periods.

As a reminder, margins can be lumpy from quarter to quarter.

Yes, he see charge of gross margins that standard pricing generally range from 15% to 25% while AC charger gross margins are approximately 50%.

But in dollar terms or a smaller fraction of the revenue of the D. C charger.

Grid service revenue margins are generally 30%.

Operating costs, excluding cost of sales was $8 $5 million for the second quarter of 2023 compared to $10 $3 million in the second quarter of 2022 the.

The decrease was primarily attributable to lower public company fees.

Cash operating expenses, excluding cost of sales stock compensation and depreciation and amortization expense was $7 3 million in the second quarter of 2023 declining from $8 3 million in the second quarter of 2022 and relatively unchanged from $7 2 million.

In the first quarter of 2023.

Our Q2 2023 results were in line with expectations set on our May earnings call.

Cash operating expenses to run at approximately $7 million.

Other income was <unk> 3 million in the second quarter of 2023 down from $4 6 million in a year ago quarter a.

A year ago period benefited from a $4 $6 million non cash gain from the change in the value fair value of warrants.

Net loss attributable to newly common stockholders increased in the second quarter of 2023 to $8 2 million from a net loss of $5 5 million in Q2 of 2022.

The increase was also primarily a result of the just mentioned non cash gain in the year ago quarter.

Now turning to our balance sheet, we had approximately $11 1 million in cash as of June 32023, excluding $5 million in restricted cash included in our cash balance was approximately $3 million of ECA funds received.

We expect to deliver these funds to customers during the third quarter of 2023.

Total cash decreased by <unk> 8 million during the second quarter of 2023.

Net cash used in operating activities was $3 2 million in the second quarter of 2020 through me improving from the first quarter.

$5 8 million.

Excluding the benefit of EPA funds net cash used in operating activities was $6 1 million for the second quarter.

During the second quarter, we raised a net $2 5 million in capital, including $1 8 million through registered direct offerings or audios, and approximately <unk> 7 million true or at the market or ATM facility.

We remain focused on optimizing our ability to raise capital as we've demonstrated.

Australia over the past few quarters, our ATM facility and the <unk> structure have allowed us to raise incremental funds to support the business.

Actually we are currently working to put in place a long term asset base lending facility or ABL, which can provide additional liquidity the borrowing capacity of the ABL is based upon our underlying inventories and accounts receivables. We believe this type of debt facility aligns well.

With our business model, given the ongoing inventory and accounts receivable amounts we carry on our balance sheet.

Rounding out our conversation on cash usage inventory decreased by $1 1 million during the quarter to $8 9 million compared to $10 million at the end of the first quarter of 2023. This is consistent with expectations and our prior commentary regarding anticipated declines in inventory.

S Charger shipments pick up a trend we expect to continue in the near term.

Now turning to megawatts under management and estimated future grid service revenues.

Reminder, megawatts under management is a metric we use to quantify the aggregate amount of electrical capacity from the deployment of our <unk> and <unk> G Chargers, which are primarily deployed in the electric school bus market in the U S and in the light duty fleet deployments in Europe . In addition to stationary batteries currently is.

And batteries are located throughout the United States, Europe and Japan.

What's under management in the second quarter increased 9% over the first quarter 2023 to 20 megawatts from $18 three.

In terms of its composition eight two megawatts were from stationary batteries at 11 eight megawatts for some EV Chargers on a year over year basis.

What's under management increased by 24%.

We continue to expect an acceleration in our megawatt central management in the second half of 2023.

Deploy more charging stations in North America, and as circle K ramps up.

Depending on the geographic regions of art appointments.

<unk> service revenue opportunities will vary we occur.

Currently seen rich service revenue opportunities for our grid services ranging between $85 per kilowatt year to $300 per kilowatt year in certain key markets, we are focusing on and with our planned expansion of <unk> charging management services in Europe .

Further grid service revenue opportunities.

These revenues include a combination of contracted services and merchant exposed services given the long term nature of our customer deployments, which revenues are generally recurring after periods as long as 10 to 12 years.

Now turning to our backlog on June 30th our hardware and services backlog was $6 1 million up 47% from $4 2 million on March 31, reflecting an acceleration of EV adoption.

Before turning the call back to Gregory I would like to note that in the first half of 2023, we have delivered on the optimism we came into the year with regarding an improvement across operating methods.

For example through the first six months of the year, we recorded two five times more DC fast Chargers unit orders.

<unk> for the first six months of 2022.

And we realized a two four times year over year increase in grid service revenues, while managing costs to maximize our liquidity.

Additionally, our elevated backlog that set us up for a strong performance in the back half of 2023.

When looking at the underlying customer delivery dates within our existing backlog, we anticipate approximately 50% of this backlog or $3 million will be recognized as revenue in the back half of 2023, while the remaining balance of the backlog is expected to be recognized in future.

<unk> after 2023.

Taking into account the future revenue generation from our existing backlog. In addition to potential future revenues from our existing proposal pipeline. We believe we are in a very good position for solid expansion of megawatts under management and revenues during the balance of 2023.

Of course, as we've said on previous earnings calls revenues can be lumpy and customers may request at any time to push out the delivery dates which could negatively impact this revenue forecasts.

We have not previously provided any sort of visibility into revenue expectations, but we are optimistic that as our backlog builds more EV programs come online.

And the supply chain issues that have plagued much of the early days of the energy transition abate.

Revenues will become more and more predictable.

We can regularly provide more clarity on our outlook for revenues.

And with that Gregory back to you to conclude on our prepared remarks.

Thanks, David to conclude myself and the team are pleased with the progress we have seen in our business. So far in 2023, the EPA Clean School bus program I was underpinned strong growth and in Q2, we continued to enhance our offering with the formation of new V. K 12, and evolving Australia I will.

While progressing on getting our recycled can't program up and running.

Interestingly BTG in movie and its technology, specifically continued to increase as the rule of VITAS you will play in the energy transition becomes increasingly apparent.

Thank you for joining us today and look forward to updating you on our November call with that said I would like to now turn the call back to the operator to begin our Q&A.

<unk>.

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad.

If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Yeah.

Our first question is from Eric Stine with Craig Hallum. Please go ahead.

Hi, Greg Hi, David.

Thanks, Eric.

Maybe just starting out I know that your primary focus or a big part of the focus is on the school bus industry, but a lot of Oems, making more and more noise about bidirectional charging bidirectional capabilities.

So just curious how do you view those those offerings.

I mean potentially would love to hear if there's any interest coming out of the auto OEM world.

In partnering with new V. Just any thoughts along those lines would be helpful.

I mean, I think we are definitely perceive as the leader in the subject.

Just in the U S, but also in Europe and in Japan.

So you know I.

I would say there is always interest.

I think the big question for the Oems in General is always you know do I do it myself.

Partner.

The other piece of the next question I'll really what other features and functionalities.

My customers like on they care about.

And you see that therefore, the F 150, and pulling basically vehicle to home.

That's what they are pushing.

Now the truth is once you have that functionality in place.

And it's a cost effective way of doing. It then you can really think about what all the full features that are that I can promote to my customers.

And it's.

It's what we called the Sharps management piece is really how do we make life easier for somebody who is choosing to get them in a streetcar and especially in the area, where we spend it offline today and you see that being able to face, but also being able to cut some consumers.

Is there something.

As this gets out.

The market and people realize the potential of that and how it could be expanded.

Is that is this scenario where we.

We would expect new V to play at some point.

Yeah, Yeah, we are very focused on fleet today, because one it seems you always see the volume today. This is also another school buses.

For BTG.

But.

We are involved in different areas. One example is circle, okay, which is really addressing the consumers and how do we extract more value with infrastructure.

That is being rolled out to support our consumers.

Other than interface part for me, though it's provides us some grid services.

Got it and then I guess sticking with circle K U I think your plan was that you would start generating grid service revenue in the second half.

I might have missed it earlier in the call, but I'm curious if you've kind of started those are that rollout and is it still the plan that you would expect our revenues here in the second half.

There are a few sites through our platform now and we definitely expect.

It will happen in the second half of the year.

Got it.

Well, maybe last one for me just unmet Gigawatts under management I know, you've got the two buckets stationary and EV.

Fair to say that.

The EV side is going to be the majority.

Or you know in stationary an area, where there actually is an opportunity beyond what you've got in Japan.

And maybe I am just curious could you remind me how the economics might differ between both of those applications.

Yes, so I mean I think that.

Now what we see in general is that on our site. She might have some stationary storage that is deployed the same time as the evs and so we want to be able to provide you with uni directional bidirectional and <unk> and the storage.

So we definitely want to be providing extract value from all of those resources.

But what we see very often is the storage.

Very rapidly.

Compared to the size of the capacity of the easy deployment.

And these readouts provide more resiliency.

Ideally what what we have done now like in Japan, where we have some quite a bit of storage.

We also like to get multipurpose storage right not just one thing you can do without storage, but how do you provide multiple.

Services, which is what we're doing with Evs Evs, primarily prefer system driving around but then we are doing.

<unk> services had been in the region, where the vehicle disconnected. So we really do get suspicion that isolation deciding where that's really good.

Pvs and developing multiple purposes.

Got it but you would say that I mean.

Not surprisingly evs.

That's the real growth driver that won't be the vast majority of megawatts under management as we look out a couple of years okay.

Alright, I appreciate it thanks.

Thanks, Craig.

Again, if you have a question. Please press Star then one.

The next question is from Brian Dobson with short Dan. Please go ahead.

Hey, how are you.

Hey, Brian So Brian Hey, so.

Looking at your order momentum in Q2 those are those are impressive stats I guess, how do you expect that to continue through the back half of the year and with the EPA rebate deadline living later this months would you expect that to.

Also potentially spur demand in the back.

I think I can start and then.

David I'll, let you follow up but I think.

This mix, although it's lumpy, but some of that.

And we saw that last year.

So on the one that is great.

Backlog that we are delivering on to this new round of EPA is really to build <unk>.

Next year's Nextgen deployments.

And we are very excited about it.

Different rules in different way of deploying small onshore projects.

But we.

We're very excited about the opportunity associated with those.

Yes.

Brian .

To reiterate with Gregory said, our backlog is up about 50% because we're seeing such strong order activity, which really helps us think about.

Our revenue generation for the balance of the year that we already once you get the contract locked in.

As a matter of timing.

As we said in the prepared remarks, roughly $3 million of that's likely to flow through in the back half of the year based on the customer data and given so we feel pretty good about our revenue going into the back half of the year and of course, we're going to have incremental organic growth.

Because we can see that on our proposal pipeline.

And what Youre starting to see as people are.

Starting to get their hands on a lot more vehicles, which really helps us.

Our pipeline higher and closed on the order activity.

Yes, very good I guess, just turning to your AI initiatives.

Why did you choose to roll those out in the Nordic countries and should we expect to see that that technology further integrated into the United States in the near future.

For sure two question two for sure is going to be it is being rolled out everywhere right.

The reason why we started this year.

It's a combination of two things right one is the.

The fact that we are bidding in markets there and so we are forecasting the market, it's something that is important.

Demonstration here of the royalty.

Combined with the forecasting of the vehicles.

And so that's why we like there but think about it.

Capable of forecasting when the vehicle is that gonna be there when they gotta be leaving the amount of inventory they are going to need to recharge and we feel able to forecast and as you put it.

Sorry.

We're able to basically procure energy very early.

For our customers.

72 hours and that that is something for a potentially so.

Let's move void being exposed to potential volatility on the energy cost.

And finally for me regarding the California School bus market, it's very likely the California leads the way in electrification for school buses.

I know that you have some good relationships with school districts in that region.

If you could quantify the potential size of that market.

So I mean.

We look at it in different ways, but you do get it.

First of all as you might know there is 480000 school bus on the roads in the U S.

They usually have a life of 12 years, a replacement rate of about 40000 per year. Those are average buy because they support activity. So it's a very large number of 24 million cubes, perhaps around spud by school bus every year.

Nowadays.

You are or how those buses are being run and you've got three large fleet owners.

First of them being addressed in owning about 50000 school buses, but she's got a bunch of medium operators.

But that are running fleets of.

Tend to turn to a few hundred.

School bus.

But the bulk of the market in terms of who owns the buses school districts.

The bulk of that market is the smaller school districts that are very distributed.

It's 274000 school buses that are owned by by small School district, So it's a very.

The various market and how you're addressing it.

At the end of the day, it's really about how do you make the transition from internal combustion engines to electric.

Yes, placebo fold those either fleet operators all school districts.

And that's why we are we are in the process of producing.

Our nextgen or will be resumed in September I'd mentioned, it yourself platform that.

He is really integrating a lot of what we called the Sharps management, helping the school districts understand where the bus is going to be ready. If there is a problem how do we how do they deal with it.

And the <unk> is fully integrated into that.

And how do you see the cost of running those vehicles.

But the priority for school districts is number one making sure the buses ready for the driver. So that it can be long time number two days of problem at Mitsubishi ex us and Thats possible.

So that they can go back on schedule.

Alright, very good thank you.

Thank you Brian . This concludes our question and answer session I would like to turn the conference back over to Gregory pull on for any closing remarks.

Thank you everybody for listening to yesterday, and we are looking forward for Mexico, and Cumulus or not thank you.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

[music].

Good afternoon.

And welcome to new the holding corporations second quarter 2023 earnings conference call.

All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.

To withdraw your question. Please press Star then two.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce Eduardo ROI as managing director of ICR. Please go ahead.

Thank you.

On today's call are Gregory plant, Chief Executive Officer, and David Robson, Chief Financial Officer of Newbie earlier today <unk> issued a press release announcing its second quarter 2023 results Paul.

All of these prepared remarks, we will open the call up for questions before we begin I would like to remind you that this call may contain forward looking statements. These forward looking statements reflect <unk> best current judgment they are subject to risks and uncertainties that could cause actual results to differ materially from those implied by these forward looking projections. These risk factors are discussed in movies.

With the SEC and in the earnings release issued today, which are available on.

That's right.

<unk> undertakes no obligation to revise or update any forward looking statements to reflect future events or circumstances.

With that I'd like to turn the call over to Gregory Pola and Chief Executive Officer of movie Gregory.

Thank you Eduardo and Hello to all we thank you for joining our second quarter 2023 original goal. We are proud to have yet again achieved a record order quarter in Q2 2023 tapping the record set in Q1 and delivering yet another quarter of strong year over year growth across key metrics, including revenue megawatts under management.

And backlog.

We came into 2023 discussing Arab curious that'd be refinery heating and overdue inflection point in both interest in and adoption of vehicle to grid technology, and specifically our differentiated new the offering.

In the first half of the year evidenced this and we are pleased to have increased visibility in our business.

I can be trained and optimize them. However, I founded on much more than just the improvement in order activity in the first half of the year.

<unk> remains the only pure play public company today with a proven track record in deploying commercially available and scalable BTG technology worldwide and places across the EV charging and grid infrastructure landscape are taking notice.

As we sit here today, the interest from companies looking to explore ways in which to partner with us or leveraging our technology.

It could be higher than it was just six or nine months ago.

Industry participants are increasingly recognizing one the value of our technology and IP across areas, such as power flow control and EV charging management and the work we are doing with AI and to the board as the bank brand and relationship networks in being able to provide holistic fleet electrification solution.

The same cannot be said, we believe about OLED pairing because your providers.

We look forward to building on this momentum as we go through the second half of 2023 and beyond.

Now to summarize our key accomplishments in the quarter and since last call.

The last time, we won't go into specifics on orders other than to point out that our DC fast Chargers orders in Q2, so a more than 15% sequential improvement over the prior quarters, then record and more than 75% increase over the second quarter of 2022.

The big driver of this increase with a 25 do you need to order our largest single order to date that we discussed on our May call at the time. We noted that this was public school district that was awarded funds via the EPA Clean School bus program, but it was not one of our districts. We supported in the grant procurement process. We have since you closed the deal.

The order was for a member of the Beacon mobility.

Companies in Massachusetts Beacon is the large fleet provider comprised of several independent companies to the U S and operating over 11000 vehicles.

We also at the daughters associated with rebate for the 2022 EPS awards across multiple school districts in line with our previously communicated expectations.

While we have shipped some of the DC charges associated with the EPA funding a significant majority of the remainder of the backlog and are likely to be shipped and recognized as revenue over the second half of the year.

Looking ahead, we look forward to supporting additional core districts as part of the 2023 installment of this massive program, which has an application deadline that is less than two weeks away.

Further we continue to see an ever expanding pipeline of potential orders beyond this.

During the quarter and so far in Q3, we continued to make progress on our strategic initiatives as well.

In Q2, we launched <unk>, a new dedicated division to provide a full range of services in order to support fleet electrification.

North America had been transportation.

And importantly, we announced the hiring of David Burdick and expand student transportation.

Sales and marketing executives from Bluebird Corporation to build out a program.

At Bluebird basically covers the significant growth in the EV bus sales developed the supporting ecosystems and enhanced relationships with their network of dealers.

As touched on during our May call and alluded to in my earlier remarks, CTX vacation is a prospect it is not a simple yes or no decision.

<unk> customers come up the learning curve. They may well decide that electrification is in their best interest, but it can take time for them to convince scuttle stakeholders, all the amazing state to come it without a better understanding our plan for how we optimize the transition to eat.

People with relationships and their ability to walk through the electrification process on a step by step basis.

And this is exactly what we have gained by bringing on David.

Is it just related to audit can be lumpy, but the lumps appear to be getting bigger and more frequent and connecticut's well we'd be critical to ensure we maximize their propulsion needs. A school district will look to scale up that adjudication journey.

To explore AI integration into a heavy duty platform.

This work is now paying off and we have announced both our strong capabilities in forecasting energy market values EBIT schedule and energy requirements.

So if we're getting power on it by AI.

Indispensable and invaluable in terms of the services it provides to the end customers.

The more we maximize forecasting capabilities the better we're able to optimize our direct <unk> vehicle readiness energy management and battery health.

With the combined power of AI and <unk>.

Eliminate the various pain points of owning an XP vehicle and ultimately make BTG, a strong selling point in the consumer market.

Today, we are seeing.

You put into practice cutting with the enhanced frequency origination capabilities. Our AI integration is enabling boss in the Nordics with Australia.

Platform is able to continuously forecast price and capacity from Nordic primary reserve to optimize the energy market.

And therefore optimize revenue part and our customers. These technology leverage maybe six plus years of experience providing frequency origination services in the energy market and is just one example of the benefits that AI integration 10 daily rates where customers.

In July we continue to evolve our capabilities by integrating <unk> into our new VP box chartered management App.

Our customers on the <unk> that can now use the enhanced functionality to better manage their battery setup, Charles chattering status charging equipment and reports.

In other words, our customers can optimize all of these activities and therefore maximize revenue generics and thanks to the power of our Australia technology.

Lastly on the strategy initiative ground as we have discussed on the last few calls integrating movies gift platform into established third party hardware network is a critical part of our strategy and our partnership with Circle K announced in the first quarter is a great example of the Hollywood movie is executing on its strategy.

We continue to work closely with circle K on integrating and we are in the process of rolling out the technology across the different sites predicted.

Our platform is also providing advanced services.

Before turning the call David a quick update on the California Senate Bill or <unk>, 33, which I have discussed on the last few calls.

By the end of May we were pleased to see that the state Senate approved the bill where they vote up 29% to nine.

As expected by the end of this month the Bill will go through appropriation in the state Assembly and if successful would go for the ask somebody about thereafter.

You need to have good dialogue with the day to day. There is on this topic and I am optimistic on a favorable outcome to 83.

Over to David to discuss our financial results.

Thanks, Craig I'll start with a recap of second quarter 2023 results in the second quarter, we generated total revenues of $2 $1 million compared to one three in the second quarter of 2022 further as Gregory alluded to.

Unit orders of our DC fast Chargers remained at elevated levels in Q2, 2023 growing over 15% from Q1 and over 75% higher than Q2 of 2022 supporting an increase in backlog in excess of $6 million, which in turn will support solid revenue generation.

<unk> in the back half of 2023.

Margins on product and service revenues were four 8% for the second quarter 2023, which was lower than the first quarter of 2023 of 17, 9% due to the impact of the timing of expenses associated with that customer sale through a long term lease arrangement and.

<unk> costs for two other long term projects under the lease accounting rules the sale hardware and installation costs were recognized as an expense upfront.

Large portion of the associated revenues will be recognized over future periods.

As a reminder, margins can be lumpy from quarter to quarter.

D C charges gross margins at standard pricing generally range from 15% to 25% while AC charger gross margins are approximately 50%.

But in dollar terms, our smaller fraction of the revenue of the DC charger grid.

Grid service revenue margins are generally 30%.

Operating costs, excluding cost of sales was $8 $5 million for the second quarter of 2023 compared to $10 $3 million in the second quarter of 2022. The decrease was primarily attributable to lower public company fees.

In the first quarter of 2023.

Our Q2 2023 results were in line with expectations set on our May earnings call quarterly cash operating expenses to run at approximately $7 million.

Other income was <unk> 3 million in the second quarter of 2023 down from $4 6 million in the year ago quarter.

The year ago period benefited from a $4 $6 million non cash gain from the change in the value fair value of warrants.

Net loss attributable to newly common stockholders increased in the second quarter of 2023 to $8 2 million from a net loss of $5 5 million in Q2 of 2022.

The increase was also primarily a result of the just mentioned non cash gain in the year ago quarter.

Now turning to our balance sheet, we had approximately $11 1 million in cash as of June 32023 exclude $8 5 million in restricted cash included in our cash balance was approximately $3 million of EBITDA funds received.

We expect to deliver these funds to customers during the third quarter of 2023.

Total cash decreased by <unk> 8 million during the second quarter 2023.

Net cash used in operating activities was $3 2 million in the second quarter of 2023, improving from the first quarter.

$5 8 million.

Excluding the benefit of EPA funds net cash used in operating activities was $6 1 million for the second quarter.

During the second quarter, we raised a net $2 5 million in capital, including $1 8 million through registered direct offerings or Rtl's and approximately <unk> 7 million through our at the market or ATM facility.

Remained focused on optimizing our ability to raise capital as we've demonstrated over the past few quarters, our ATM facility and the Rds structure have allowed us to raise incremental funds to support the business. Additionally, we are currently working to put in place a long term asset base lending facility or <unk>.

L, which can provide additional liquidity the borrowing capacity of the ABL is based upon our underlying inventories and accounts receivables. We believe this type of debt facility aligns well with our business model given the ongoing inventory and accounts receivable amounts we carry on our <unk>.

Balance sheet.

Rounding out our conversation on cash usage inventory decreased by $1 $1 million during the quarter to $8 9 million compared to $10 million at the end of the first quarter of 2023. This is consistent with expectations and our prior commentary regarding anticipated declines in inventory.

S Charger shipments pick up a trend we expect to continue in the near term.

Now turning to megawatts under management and estimated future grid service revenues as.

As a reminder megawatts under management is a metric we use to quantify the aggregate amount of electric capacity from the deployment of our <unk> and BTG Chargers, which are primarily deployed in the electric school bus market in the U S and in the light duty fleet deployments in Europe . In addition to stationary batteries currently.

These chargers and batteries are located throughout the United States, Europe , and Japan Nagel.

Megawatts under management in the second quarter increased 9% over the first quarter 2023 to 20 megawatts from $18 three <unk>.

In terms of its composition eight two megawatts were from stationary batteries at 11 eight megawatts for some EV Chargers on a year over year basis megawatts under management increased by 24%.

We continue to expect an acceleration in our megawatt central management in the second half of 2023, as we deploy more charging stations in North America, and as circle K ramps up.

Depending on the geographic regions of art appointments, our grid service revenue opportunities.

We are currently seeing grid service revenue opportunities for vehicles for grid services, ranging between $85 per kilowatt year to $300 per kilowatt and year in certain key markets. We are focusing on and with our planned expansion of <unk> charging management services in Europe , we are seeing further grid service revenue opportunities.

These revenues include a combination of contracted services and merchant exposed services, given the long term nature of our customer deployments.

Revenues are generally recurring.

<unk> as long as 10 to 12 years.

Now turning to our backlog on June 30, our hardware and services backlog was $6 1 million up 47% from $4 2 million on March 31.

<unk>, an acceleration of EV adoption.

For example through the first six months of the year, we recorded two five times more DC fast Charger unit orders compared to the first six months of 2022.

And we realized a two four times year over year increase in grid service revenues, while managing costs to maximize our liquidity.

Additionally, our elevated backlog that set us up for a strong performance in the back half of 2023.

<unk> after 2023.

Of course, as we've said on previous earnings calls revenues can be lumpy and customers may request at any time to push out the delivery dates which could negatively impact this revenue forecast.

We have not previously provided any sort of visibility into revenue expectations, but we are optimistic that as our backlog builds more EV programs come online.

And the supply chain issues that have plagued much of the early days of the energy transition abate.

Revenues will become more and more predictable such that we can regularly provide more clarity on our outlook for revenues and with that Gregory back to you to conclude on our prepared remarks.

Thanks, David to conclude myself and the team are pleased with the progress we have seen in our business. So far in 2023, the EPA Clean School bus program is underpinned strong growth and in Q2, we continue to enhance our offering with the formation of <unk> and call their evolving Australia, AI, while progressing I'm getting.

Our circle K program up and running.

Interestingly <unk> and its technology, specifically continue to increase as the role of <unk> will play in the energy transition becomes increasingly apparent.

We thank you Paul joining us today and look forward to updating you on our November call with that said I would like to now turn the call back to the operator to begin Q&A operator.

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad.

If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Sure.

Our first question is from Eric Stine with Craig Hallum. Please go ahead.

Hi, Greg Hi, David.

Thanks, Eric.

So just curious how do you view those those offerings.

I mean potentially would love to hear if there is any interest coming out of the auto OEM world.

In partnering with new <unk>, just any thoughts along those lines would be helpful.

I mean, I think we are definitely perceive as the leader in the subject.

Just in the U S, but also in Europe and in Japan.

So.

I would say there is always interest.

I think the big question for the Oems in General is always you know do I do it myself.

Partner.

And the other piece to the next question I'll really what are the features and functionality.

My customers back on they care about.

And you see that therefore, the F 150 polling basically vehicle to home.

That's what they are pushing.

Now the truth is once you have that functionality in place.

And it's a cost effective way of doing. It then you can really think about it what are the full features that that I can promote to my customers.

And.

It's what we called the Sharps management piece is really how do we make life easier for somebody who is choosing to get the ministry car.

The area, where we spend it offline today and we see that not just not being able to fleets, but also applicable to the consumers.

Is there something as this gets out.

The market and people realize the potential of that and how it could be expanded.

Is that is there a scenario where.

We would expect <unk> to play at some point.

Yes.

We are very focused on fleet today, because one you always see the volume today. This is also another school bus.

Is the killer App for BTG.

Bob.

We are involved in different areas. One example is circle, okay, which is really addressing the consumers and how do we extract more value with infrastructure.

That is being rolled out to support our consumers.

That means efficient platform provides southern grid services.

Got it and then I guess sticking with circle K U I think your plan was that you would start generating grid service revenue in the second half.

I might have missed it earlier in the call, but I'm curious if you've kind of started those are that rollout and is it still the plan that you would expect revenues here in the second half.

Yeah, the <unk> connect to our platform now and we definitely expect.

Revenues were up in the second half of the year.

Got it.

Well, maybe last one for me just on megawatts under management I know you've got the two buckets stationary and EV I mean is it fair to say that.

The EV side is going to be the majority.

Or in stationary an area, where there actually is an opportunity beyond what you've got in Japan.

And maybe I am just curious could you remind me how the economics might differ between both of those applications.

Yes, so I mean, I think that the.

Now what we see in general is that on a site you might have some station that was thought instead is goodbye at the same time as the Evs and so we wanted to be able to provide your unit directional bidirectional and <unk> and the storage.

So we definitely want to be providing strike.

Strike value from all of those resources.

But what we see very often is the storage.

Very rapidly.

Compared to the size of the capacity of the easy deployment.

And these readouts provide more resiliency.

Ideally what we have done now like in Japan, where we have some quite a bit of storage.

We also would like to get multi purpose storage right not just one thing you can do that but how do you provide multiple.

Services, which is what we're doing with Evs EV, primarily prefer system driving around but then we are doing.

Good services, you've been in the region will have a bakery disconnected. So we really look at the station by station the same we're estimating.

TB and developing multiple purposes.

Got it but you would say that I mean.

Not surprisingly evs.

That's the real growth driver that won't be the vast majority of megawatts under management as we look out a couple of years okay.

Alright, I appreciate it thanks.

Thanks, Craig.

Again, if you have a question. Please press Star then one.

The next question is from Brian Dobson with short Dan. Please go ahead.

Hey, how are you.

Hey, Brian Hey, Brian Hey, so.

Also potentially spur demand in the back.

I think I kind of start and then.

David I'll, let you follow up but I think.

This makes all of those lumpy right.

Alright.

And we saw that last year.

So on the one eight is greater.

This backlog that's my idea to bring onto this new round of EPA is routine bailed next year's next year deployments.

And we are very excited about it.

What was the default way of deploying small onshore projects.

Which we.

We're very excited about the opportunity associated with those.

Yes, Brian .

Brian .

To reiterate what Gregory said, our backlog is up about 50% because we're seeing such strong order activity, which really helps us think about.

Our revenue generation for the balance of the year that we already once you get the contract locked in.

As a matter of timing.

As we said on the prepared remarks.

Mark's roughly $3 million of that's likely to flow through in the back half of the year based on the customer data we have been given so we feel pretty good about our revenue going into the back half of the year and of course, we're going to have incremental organic growth.

Because we can see that on our proposal pipeline.

And what Youre starting to see as people are.

Starting to get their hands on a lot more vehicles, which really helps us.

Our pipeline higher and close on the order activity.

Yes.

Yes, very good I guess, just turning to your.

Your AI initiatives.

Why did you choose to roll those out in the Nordic countries and should we expect to see that that technology further integrated into the United States in the near future.

Sure.

Question two for sure is going to be it is being rolled out everywhere right.

The reason why we started.

Because the combination of two things right one is the.

The fact that we are bidding in markets there and so we are forecasting the market, it's something that is important.

Demonstration here of the walls of the AI platform.

Combined with the forecasting of the vehicles.

So thats why we like there but.

Think about it.

Capable of forecasting when the vehicle is that going to be there when they got to be leaving the amount of initiatives, you're going to need to recharge and we feel able to forecast and as you put pricing sorry.

Bold to basically procure energy very early.

Sorry, just on let us know.

72 hours and that bass.

<unk>.

Void being exposed to potential volatility on the energy cost.

And finally for me regarding the California School bus market, it's very likely the California leads the way in electrification for school buses.

I know that you have some.

Good relationships with school districts in that region.

If you could quantify the potential size of that market.

So I mean, we.

We look at it in different ways, but you do get it.

First of all as you might know there was 480000 school bus on the road in the U S.

Usually you have a life of 12 years.

A replacement rate of about 40000 per year those are average because the volatility. So it's a very large number of 24 million cubes, perhaps transport by school bus every year.

Nowadays.

You are a hospital specialty is not being run we've got three large fleet owners.

First of them being addressed in owning about 50000 school buses.

You've got a bunch of medium operators.

But that are running fleets of.

Tend to turn to a few hundred.

School bus.

But the bulk of the market in terms of who owns the buses the school districts.

The bulk of that market is the smaller school districts are very distributed.

It's 274000 school buses that I don't owned by by smaller School District, So it's a very.

No the various market and how you're addressing it.

In Poland.

The end of the day, it's really about how do you make the transition from internal combustion engines to electric.

ECS placebo solve those either fleet operators also will districts.

And that's why we're in the process of pre leasing.

Our next will be resumed in September I mentioned their shelf platform that is really integrating a lot of what we called the Sharps management, helping the school districts understand where the bus is going to be ready. If there is a problem how do we how do they deal with it.

And the <unk> is fully integrated into that.

And help have you seen the cost of running those vehicles.

But the priority for school districts. These number one making sure. The bus is ready for the driver. So thats Robert can be long time number 200 days of problem at Mitsubishi accessible as possible.

They can go back on schedule.

Alright, very good thank you.

Thanks, Brian . This concludes our question and answer session I would like to turn the conference back over to Gregory pull on for any closing remarks.

Thank you everybody for listening to us today, and we're looking forward for next door and Cumulus or not thank you.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Q2 2023 Nuvve Holding Corp Earnings Call

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